The overall incidence of tax will be reduced with multiple existing levies, such as excise duty, central sales tax, entry tax, value added tax (VAT), and service tax being subsumed into single rate GST.
The country’s biggest tax reform Goods and Services Tax (GST) is likely to reduce overall prices by replacing the existing system of “tax on tax”.”GST will end cascading of taxes, which may reduce overall prices. Consumers to be benefitted in most cases,” Revenue Secretary Hasmukh Adhia said today.
The overall incidence of tax will be reduced with multiple existing levies, such as excise duty, central sales tax, entry tax, value added tax (VAT), and service tax being subsumed into single rate GST.
The current levy of 15 percent service tax may be escalated to 18 percent after the rollout of GST from July 1. However, in this case, increase in the numerical value of the rate may not necessarily result in services becoming more expensive.
“About 18 percent (service tax) will become equivalent to 15 percent. There will not be much of an increase in service tax. There might be a marginal increase in certain cases,” Adhia told the reporters at the GST Conclave organised by the Finance Ministry.
He further explained that since the service provider will also be paying GST for the good bought (and used for his services), he would receive input tax credit for the same. Therefore, tax incidence is likely to be similar.
There is possibility of two different service charges with the implementation of GST.
“It is a possibility that there will be more than one rate for service tax. It is not necessary all services will attract 18 percent tax. Abatement will be kept in mind…for few services, the rate will be decided, keeping in mind abatement (relief) that it attracts. For such services, rate will be less that 18 percent,” Adhia said.
Taxpayer Compliance
The government will soon come up with the details and the rules concerning the provision of ‘GST Compliance Rating’ for an assessee under the GST law.
Every assessee will be rated as per the ‘track record’ of paying taxes to the government after selling goods, Adhia said.
The GSTN system will provide the track record regarding the compliance level of a taxpayer, especially about his track record related to timely uploading of his supply invoices, giving details about the auto reversals that have happened for invoices issued by a supplier.
If a taxpayer tries to evade tax, the software under IT infrastructure GST Network (GSTN) will be able to detect that and thereby downgrade its rating.
GSTN is a company, which will provide shared IT infrastructure and services to both central and state governments including taxpayers and other stakeholders. It will provide front-end services of registration, returns, payments, etc. to all taxpayers, making it the interface between the government and the taxpayers.
Adhia further said that after the rollout of GST, payment will have to be made through digital modes such as NEFT, BHIM, debit credit cards or by cheque, Adhia said, adding that cash payment up to only Rs 10,000 will be accepted.